The Fed Holds as Markets Expected

• The US FOMC left the Fed funds rate unchanged at 4.25–4.50% this morning, in line with market consensus. Members acknowledged rising risks to both inflation and unemployment but signalled a cautious, data-dependent stance. OIS pricing now reflects 21bps of cuts by July and 79bps by year-end.
• There wasn’t much of a reaction in the bond market, with the U.S. 10-year dropping by 5 basis points.
• The Fed’s decision and tone are unlikely to shift the RBA’s near-term stance, but softer global yields could provide mild support for AUD fixed income markets.
• It is a light domestic data calendar today, though attention will turn to the Bank of England meeting tonight, where a rate cut is widely expected.